A move by Amazon to make its transportation, distribution, and fulfillment services available to any business will not eliminate established logistics providers like FedEx and UPS in the near term, but it will still loom large over the industry, according to experts cited by Supply Chain Dive.

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The company introduced Amazon Supply Chain Services, which combines freight transportation, parcel shipping, and distribution and fulfillment using its network of U.S. fulfillment centers, trailers, intermodal containers, and aircraft. Previously, Amazon offered similar capabilities to sellers on its marketplace through Supply Chain by Amazon, but the new launch widened the portfolio to all companies. Matthew Hertz, CEO and founder of Third Person, does not view the announcement as an immediate game changer but noted that Amazon has been steadily gaining business through offerings like Amazon Shipping and Multichannel Fulfillment. He predicted that over the next three years, Amazon will organically continue to grow and take more market share as its customers expand.

Amazon Shipping, a two-to-five-day parcel delivery service within ASCS, could pressure parcel delivery companies primarily through pricing, said Nate Skiver, a parcel analyst and founder of LPF Spend Management. Smaller alternative carriers that rely on low rates to attract customers are especially vulnerable to losing volume to Amazon Shipping, as they lack service differentiation and can only respond with price cuts. Skiver added that FedEx and UPS are also exposed to greater pricing competition from Amazon Shipping, but both carriers have prioritized higher-value deliveries in segments like healthcare that require more complex logistics. They have moved away from focusing on lower-value e-commerce shipments to residences, an area where Amazon already has a strong presence.

Regarding ASCS trucking services, Amazon remains limited in its ability to compete with less-than-truckload giants such as FedEx Freight and Old Dominion Freight Line, according to Scooter Sayers, an LTL trucking consultant with Sayers Logistics. Amazon Freight currently offers LTL coverage in parts of the U.S. for inbound shipments to Amazon facilities, and the company would need to expand its infrastructure and driver base to serve a wider range of shipments and better compete.

ASCS also includes distribution and fulfillment, but Amazon has long been a dominant player in that area through Fulfillment by Amazon for its third-party sellers, experts noted. Amazon Warehousing and Distribution and Amazon Multichannel Fulfillment have already provided storage and fulfillment for products destined for Amazon’s network or external channels. Derek Lossing, founder of Cirrus Global Advisors and a former logistics leader at Amazon, observed that Amazon already fulfills billions of parcels for third parties. While the individual components of ASCS may not be entirely new or threatening to all incumbents, bundling those services into one package and marketing it to a broader customer base could offer additional value and create a greater competitive challenge, Lossing said.

Even if ASCS does not immediately overtake every other logistics player, the service may still appeal to many brands. Current ASCS customers include 3M and Procter & Gamble for trucking, Lands’ End for inventory positioning, and American Eagle Outfitters for parcel shipping. Before the ASCS launch, cookware seller Avacraft used Amazon Warehousing and Distribution to improve inventory management, while companies like KiwiCo and Bark have used Amazon Shipping for speed and cost advantages. Fast-growing brands that need to quickly scale their supply chains are strong candidates for ASCS, as they likely seek a one-stop logistics shop from manufacturing to the end consumer, according to Lossing. Amazon Shipping is a natural fit for retailers already using Amazon for inventory placement and fulfillment, and direct-to-consumer shippers, as well as enterprise and omnichannel retailers shipping lightweight residential volume, are likely to be interested.

Brands should weigh the potential pros and cons before onboarding, experts said. For instance, it remains unclear how Amazon will allocate capacity between inventory sold on its own marketplace and products from customers using the company solely as a logistics partner; Amazon did not respond to a request for comment on that matter. Capacity constraints are not unique to Amazon, but challenges could compound ahead of the peak holiday shipping season as sellers fill warehouses with inventory for a surge in orders. In past years, Amazon has advised sellers to bring Black Friday inventory in early to avoid capacity limits. Lossing noted that managing that is already difficult, and adding large enterprise brands that want to triple their volume during the same month could create ceilings even for Amazon. How Amazon handles data from businesses using its services also remains a question, as the e-commerce giant competes with a wide range of brands through its private label business, which has faced regulatory scrutiny. Despite this, Amazon has a reputation for fixing shortcomings and addressing issues over time, even if solutions take a while, according to Ninaad Acharya, CEO of Fulfillment IQ. He said he would not want to be an early-stage customer but sees good value emerging on the other side.

Source: IndexBox Market Intelligence Platform